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Friday, May 11, 2012

How easy it is to push friendship aside when money gets in the way. GlaxoSmithKline PLC has pushed its two-decades long friendly partnership with Human Genome Sciences Inc. aside and is taking its acquisition bid hostile. The company commenced a tender offer for HGS May 10, taking its $13 per share offer directly to shareholders after the company’s board of directors rejected it in April.

The offer represents an 81% premium over HGS’ closing share price of $7.17 April 18, the last trading day before the offer was publicly disclosed, but shareholders aren’t likely to see the value the same as GSK. Just a year ago, HGS closed trading at $27.82 on May 10, 2011. But the company’s stock has been under pressure as sales of the company’s first marketed drug, the lupus treatment Benlysta, have failed to take off the way some investors hoped.

The fiasco makes the timing right for GSK. The two companies are partnered on Benlysta, as well as on two late-stage pipeline drugs. The tie-ups leave HGS particularly vulnerable to a takeover by GSK since it is unlikely another suitor will step up for a company that is already so deeply engaged with a another big pharma.

Still, HGS is trying to pull what levers it can. The company retained Goldman Sachs and Credit Suisse to explore strategic alternatives. And shareholders have already pushed the stock over $14, suggesting they see a chance GSK will push its bid higher. But GSK is putting the pressure on HGS now, and says it has no interest in being part of the strategic review process.

The hostile turn has added fuel to speculation that GSK’s interest in the pipeline drug darapladib is greater than the company is letting on. For a Phase III drug in development for cardiovascular disease, darapladib has been flying under the radar. It is an inhibitor of lipoprotein-associated phospholipase A2 (Lp-PLA2), a first-in-class drug candidate, but its mechanism of action is largely unknown, and investors have thus been skeptical of the program. It’s high-risk, but it could also be high-reward.

GSK’s sudden decision to acquire HGS after such a lengthy partnership has sounded some alarms among HGS shareholders, who are wondering if GSK is looking to get full control of darapladib before Phase III data read out. HGS stands to receive a 10% royalty on worldwide sales, and has an option to co-promote the drug in North America and Europe with a 20% profit share. Management at HGS has been talking up the darapladib opportunity in the meantime, while GSK CEO Andrew Witty has done just the opposite. “It will be two years before anybody can really call a judgment of whether or not this molecule is actually capable of being developed into a drug,” he warned during an April conference call.

The drug is being studied in two large Phase III outcomes studies, but after conducting an interim analysis, an independent data monitoring committee recommended the studies continue. A positive sign in any event.

The other Phase III drug, albiglutide, is a once-weekly injectable GLP-1 agonist for type 2 diabetes that hardly seems worth fighting over given the number of entrenched rivals already on the market.

The question now is if HGS shareholders will be willing to settle for $13 per share and accept the offer with a sigh that includes some relief or hold out for a few dollars more in the hopes GSK is willing to bet higher on darapladib too. The offer is set to expire on June 7.

In other news, it was a ho-hum week on the deal-making front. But don't let that spoil your enjoyment of the next edition of ...

Daiichi Sankyo/Coherus: Daiichi Sankyo Co. Ltd., the latest in a long line of Japanese pharma to make some noise in the increasingly busy biosimilars space, has tapped a California virtual start-up to help it develop etanercept and rituximab biosimilars. Daiichi has partnered with Coherus BioSciences, which will retain rights to the molecules outside of Japan, Taiwan, and South Korea. Further terms weren’t disclosed. Although Coherus itself was only founded in 2010, “its founders are in fact an elite group of biotech pioneers who helped build America’s first-generation biotherapeutics industry, including companies like Amgen, Genentech, Roche and Immunex," Daiichi Sankyo told PharmAsia News. Coherus is lead by CEO Denny Lanfear, a long-time Amgen employee, and co-founder Stuart Builder, formerly of Genentech. Builder was the start-up director for the biotech Alnara Pharmaceuticals, which was sold to Eli Lilly & Co. for $180 million in cash plus up to $200 million in milestones. This isn’t Daiichi’s first foray into biosimilars. The company already has biosimilar capabilities through subsidiary Ranbaxy, which is developing versions of filgrastim and molgramostim, and through the $16.9 million acquisition of biosimilar firm Zenotech Laboratories in Aug. 2010. Coherus says to expect more deals in the not too distant future and that it has five oncology and inflammation focused biosimilars in development. – Dan Poppy

Pozen/Desitin: Pozen, which has built a business strategy around developing fixed-dose, combination drugs comprising low-cost generic compounds, has sold EU rights for MT 400, its Phase III migraine candidate, to Desitin Arzneimittel GMBH of Germany for a nominal upfront payment, modest milestone payments and potential sales royalties. In structure, the deal resembles a previous agreement the North Carolina-based firm reached last year with Johnson & Johnson unit Cilag AG for manufacturing and marketing rights to ‘400 in Brazil, Columbia, Ecuador and Peru. The pact with Desitin, which covers the 27 EU nations as well as Switzerland and Norway, calls for $3 million in pre-commercialization payments, including a $500,000 upfront. The agreement, which also stipulates double-digit royalties on net sales of ‘400 that will increase based on annual sales volume, will expire on a country-by-country basis on the 15th anniversary of the product’s first commercial sale in each market licensed to Desitin. The Cilag deal, which included an undisclosed small upfront payment, provides for expiration at 15 years after the first product sale in each market, with royalties in the high single digits for the first 10 years, then in the lower single digits for the final five. MT 400 is a proprietary combination of sumatriptan and naproxen sodium – Pozen also licenses U.S. rights to a different dose of the combination, known as Treximet, to GlaxoSmithKline.—Joseph Haas

Evotec/4-Antibody: European drug discovery platform companies Evotec AG and 4-Antibody AG have teamed up to provide collaborative antibody discovery services to Evotec’s customers. The deal will allow Hamburg-based Evotec to offer an improved early-stage antibody selection service, along with its existing high-throughput and high-content screening offering. Evotec will use 4-Antibody’s proprietary Retrocyte Display technology, a platform which allows expression and screening of antibody libraries to identify antigen-specific antibodies. The two companies will share profits from services and discoveries made under the agreement. Evotec will also pay Basel, Switzerland-based 4-Antibody a €2 million ($2.56 million) up-front access fee, although the companies said that cost will be fully reimbursable from returns under the partnership. The deal is expected to give 4-Antibody access to a wider field of customers, while improving Evotec’s antibody selection capabilities. Evotec says the agreement will allow it to better differentiate between antagonist and agonist antibodies, while improving attrition rates. – Paul Bonanos

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